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The Opportunities and Challenges                     of The Changing Public Services                   Landscape for The T...
THE OPPORTUNITIES AND CHALLENGES OF THECHANGING PUBLIC SERVICES LANDSCAPE FOR     THE THIRD SECTOR IN SCOTLAND: A         ...
CONTENTSEXECUTIVE SUMMARY                                                                  1INTRODUCTION                  ...
Redundancy planning and reducing staff costs                                               44    Property rationalisations...
ACKNOWLEDGMENTSThe research team would like to thank all the organisations and respondents whogave generously of their tim...
EXECUTIVE SUMMARYIntroductionThis report outlines findings from year two of a three-year research projectexamining ‘The Op...
MethodologyThe methodology involved qualitative research within 20 voluntary sectororganisations based in Scotland. The me...
The Welfare Reform Bill in the UK had started to have adverse effects on someTSOs and their clients, particularly those wo...
The impact on service provision had been minimal despite funding being (at best) ata standstill and (at worst) a 15% cut. ...
Diversifying the funding base and social enterpriseMany TSOs were thinking about how to diversify their funding base to be...
for clients with complex issues or where literacy and numeracy was low. Also therewas no standardised way of measuring out...
Involvement in service designThe system of competitive tendering usually involved a funder specifying the servicerequired ...
TSOs were aware of the importance of partnership working as a means of meetingthe challenges created by the policy and fun...
INTRODUCTION1.1 This report outlines findings from year two of a three-year research project    examining ‘The Changing Pu...
• Relationships/ partnerships                        Especially involvement of TSOs in Services Design (co-              ...
participants. This was designed to ensure the establishment of a purposive     sample of organisations working in differen...
Three focus groups1.16 Twelve organisations were divided into three focus groups of four participants.     Each focus grou...
Thematic analysis has been carried out on individual focus group and case       study data collected in Years 1 and 2. Thi...
within the timeframe or because access was restricted by the key contact.     Where possible, alternative participants wer...
into numerous categories, but they are necessary for convenience.     Appendices B and C provide more details about each o...
2 CHANGES TO THE POLICY AND FUNDING ENVIRONMENTChapter SummaryThis chapter outlines the key changes to the policy and fund...
save money prior to April 2011 through standstill funding, cutting and changingconditions to existing contracts and re-app...
(CPPs). This fundamentally changed the relationship between national    and local government in Scotland. This aimed to pr...
services, Best Value, application processes for grant funding, strategic             commissioning and procurement, re-ten...
•      Driving continuing reform across all public services based on outcomes,              improved performance and cost ...
Table 1: Policy and fieldwork timelineDate     UK Government                Scottish Government                    Fieldwo...
Changes to the policy environment2.8 Between Years 1 and 2 significant changes in the policy environment occurred:    firs...
‘prime contractors’ to deliver services in specific regions across the UK. The         prime contractors need to have subs...
significant funding for them in the short-term although there was potential to       pick up some funding as a sub-contrac...
2.21 There was some concern that this had resulted in less specialist and more     generic help being available to clients...
2.26 For TSOs working in health and social care, personalisation is increasingly     important to the way in which their s...
This is a Scottish Government policy which has the best of intentions but in a     changing environment is being used in s...
perceived that the greater emphasis within policy on early years could have a      detrimental impact on their work with t...
Regulation2.37 TSOs are required to comply with a raft of regulations and monitoring     requirements, some of which vary ...
extent to which TSOs in Scotland have experienced funding cuts within the last      year.2.42 This section also examines t...
2.46 One TSO also felt that there was an increasing lack of clarity about funding     processes (e.g. the application proc...
participant noted that some local authorities were creating new funding at the     same time they were cutting others. Oth...
Impact of policy and funding changes2.57 There was some concern among TSOs about the impact the current policy and     fun...
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
The opportunities and challenges of changing public services landscape for the third sector   year two
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  1. 1. The Opportunities and Challenges of The Changing Public Services Landscape for The Third Sector In Scotland: A Longitudinal Study: Year Two ReportVoluntary Issues
  2. 2. THE OPPORTUNITIES AND CHALLENGES OF THECHANGING PUBLIC SERVICES LANDSCAPE FOR THE THIRD SECTOR IN SCOTLAND: A LONGITUDINAL STUDY YEAR TWO REPORTStephen P Osborne, Sue Bond, Matthew Dutton, and Elric Honore Employment Research Institute, Edinburgh Napier University Business School & Centre for Public Services Research, University of Edinburgh Business School Scottish Government Social Research 2012
  3. 3. CONTENTSEXECUTIVE SUMMARY 1INTRODUCTION 9 Methodology 10 Initial selection of case study and group work organisations 10 In-depth case studies 11 Three focus groups 12 Anonymity 12 Analysis 12 Methodological challenges 13 Structure of the report 142. CHANGES TO THE POLICY AND FUNDING ENVIRONMENT 16 Introduction 17 Changes to the policy environment 22 UK government policy 22 Scottish government policy 25 Volunteering 28 Regulation 29 Local authorities 29 Changes to the funding environment 29 Tendering 30 Funding cuts 31 New opportunities 31 Loan finance 32 Impact of policy and funding changes 33 Changes in demand for services 33 Impact on service provision 34 Impact on clients 34 Impact on staff 35 Conclusion 363. THIRD SECTOR CHALLENGES AND RESPONSES 37 Introduction 38 Responding to funding opportunities and the potential for ‘strategic drift’ 39 Case Study One: Focusing on Delivering Services to a Core Client Group 40 Organisational reviews 41 Case Study Two: Following Through on the 5 Year Corporate Strategy 42 Making cost savings/remaining competitive 44 Restructuring 44
  4. 4. Redundancy planning and reducing staff costs 44 Property rationalisations 44 Mergers 45 Internal capacity 46 Diversifying the funding base and social enterprise 47 Case Study Three: Diversifying the Funding Base through Social Firms 48 Fundraising 50 Competition 50 Governance and leadership 51 Challenges for senior management 51 Board of directors/trustees 52 Conclusion 534. PERFORMANCE AND OUTCOME MEASURES 55 Measuring ‘soft’ outcomes 55 Providing additional evidence to funders 56 Using additional measures to demonstrate impacts 56 Case Study Four: Measuring the Client Journey: Logic Modelling 57 Conclusion 585. PARTNERSHIP WORKING 59 Introduction 60 Trends in partnership working 60 Case Study Five: Creating an Assured Partners Network across Scotland 62 Third sector infrastructure: intermediary bodies 64 Local infrastructure: ‘Third Sector Interfaces’ 64 Case Study Six: Development of an Independent Third Sector Interface in Aberdeen 65 National infrastructure: relationships with Scottish Council for Voluntary Organisations 67 Involvement in other partnership forums 67 Partnerships with local authorities 68 Involvement in service design 69 Public Social Partnerships 70 Trends 70 Conclusion 716. CONCLUSIONS 72APPENDIX A: AIMS AND OBJECTIVES OF THE RESEARCH 74APPENDIX B: PARTICIPANTS IN THE CASE STUDIES 75APPENDIX C: ORGANISATIONAL PROFILES 76APPENDIX D: FLEXIBLE INTERVIEW SCHEDULE FOR YEAR TWO CASE STUDIES & FOCUSGROUPS (2011) Year Two 78APPENDIX E: AGENDA FOR FOCUS GROUPS 82GLOSSARY 84REFERENCES 86
  5. 5. ACKNOWLEDGMENTSThe research team would like to thank all the organisations and respondents whogave generously of their time in order participate and make this research projectpossible.The research team gratefully acknowledges contributions to the report fromcolleagues at the Employment Research Institute, in particular Valerie Edgell andRonald W MacQuaid who carried out the Employability Focus Group.We would also like to thank Dr Kay Barclay at the Scottish Government andmembers of the Research Advisory Group for their support and guidance.
  6. 6. EXECUTIVE SUMMARYIntroductionThis report outlines findings from year two of a three-year research projectexamining ‘The Opportunities and Challenges of the Changing Public ServicesLandscape for the Third Sector in Scotland: A Longitudinal Study’. This report buildson and extends the research reported in the Year One Baseline Report 1. This workwas commissioned by the Scottish Government, and using qualitative case studiesand focus groups, aims to track the way in which a selection of third sectororganisations (TSOs) respond to the changing opportunities and challenges over aperiod of three years starting from 2009/2010.The Scottish Government has acknowledged that the third sector has a key role toplay in delivering public services that are high quality, continually improving, efficientand responsive to local peoples’ needs. This work will inform future partnership-working with the third sector.The first year of the research (see Year One report) established a ‘baseline’ by whichsubsequent years of research could be compared. The Year Two research aimed tobuild on and extend the original Year One objectives as well as respond to emergingpolicy. At a meeting of the Research Advisory Group in February 2011 2 , themembers agreed that the focus of the Year Two research should include thefollowing: • Relationships/ partnerships  Especially involvement of TSOs in Services Design (co- production)  Views of new local infrastructure (interfaces) and third sector engagement at local level  Other partnerships • Financing the third sector • Outcome measurement (Social Return on Investment and other impact measurements) • Leadership and governance • Policy changes/ election context • Delivering high quality services (case study examples).1 Osborne, S., Bond, S., Dutton, M and E. Honore (2011) The Opportunities and Challenges of the ChangingPublic Services Landscape for the Third Sector in Scotland: A Longitudinal Study Year One Report: BaselineFindings, Edinburgh: Scottish Government.2 Research Advisory Group Minutes of the Meeting, held at Scottish Government, Victoria Quay, Edinburgh on 9February 2011. 1
  7. 7. MethodologyThe methodology involved qualitative research within 20 voluntary sectororganisations based in Scotland. The methodology involved two key components:(1) in-depth case studies with eight TSOs and; (2) three focus groups involving atotal of twelve additional TSOs.Case studies for Year Two were carried out approximately one year after the firstvisit with organisations (between January and June 2011). In Year Two the maincontact in each case study organisation was again approached and asked for aninterview and permission to follow up staff contacted in Year One. If original staffwere not available for interview other staff covering a similar role were identified andinterviewed, where possible. In-depth face-to-face interviews were carried out withstaff at different levels of the organisation, depending on access made available.Twelve organisations were divided into three focus groups of four participants. Eachfocus group pulled together organisations with strong interests in particular areas.These included: (a) equalities; (b) social care and health care, and (c)employability/economic development/regeneration 3 . One representative from eachorganisation (usually the Chief Executive or a member of the senior managementteam) attended one of the focus groups. Focus groups were carried out at sixmonthly intervals following the baseline meeting. This report covers key findingsfrom two waves of focus group meetings which were carried out between Octoberand November 2010 and April and May 2011.In addition, a workshop was carried out in June 2011 at Edinburgh UniversityBusiness School. Representatives from all participating organisations were invitedto attend. Notes were taken on the discussion, and where appropriate, issuesdiscussed are referred to in the report.Changes to the policy and funding environmentChanges to the policy environmentAs well as cuts to public sector funding, other key changes in the policy environmentat UK Government and Scottish Government level included the following:The introduction of the Work Programme across the UK in 2010 replaced existingemployability streams with a significantly different method for contracting services.This had the potential to have a major impact on TSOs who provided employabilityservices in Scotland, although at the time of the research the outcome was not yetclear.3 Note that these categorisations were not applied rigidly and there was some overlap in the activitiesof organisations. 2
  8. 8. The Welfare Reform Bill in the UK had started to have adverse effects on someTSOs and their clients, particularly those working with single parents, carers andpeople with disability.Personalisation (or self-directed support) in Scotland was becoming increasinglyimportant on the agenda of TSOs who provided services in health and social care.Most were supportive of the principle of devolving power to service users with anumber of TSOs already keen to develop personalisation for their own services.However, there was concern that the personalisation agenda had been appropriatedby some local authorities as a means of cost-cutting rather than as a genuine reformof services.The shifting nature of policy priorities presented on-going challenges andopportunities for TSOs. The perceived low priority of volunteering in policy was anissue for some TSOs who relied on a volunteer base, while it was not entirely clearhow the ‘Big Society’ agenda would impact in Scotland. The context of ever-tightening resources had meant regulation had become increasingly burdensome forsome. Variations in policy priorities between local authorities remained an on-goingissue.Changes to the funding environmentIncreasingly, tendering was the main method by which funding was contracted.However, there were variations in approaches between local authorities and nostandardised approach on what services should formally go out to tender. Therewere tentative indications that some local authorities might be moving towardsallowing more input from TSOs into service delivery plans. There was also an on-going concern around the emphasis on cost rather than quality in funding decisions.Most of the spending cuts were expected from April 2011, and therefore after most ofthe year two fieldwork had taken place (between Jan and March 2011). However,prior to this date actual cuts had been relatively limited. However, funders hadattempted to save money prior to April 2011 through standstill funding, cutting andchanging conditions to existing contracts and re-appropriating underspends.Despite anticipated cuts, many TSOs felt that new opportunities might emergethrough more contracting out by local authorities, new policy priorities as well asgaps created by other TSOs closing down.Many TSOs had not considered applying for private loan finance because they hadlimited assets, security and private income, although a small number had been ableto successfully access this source of income in order to invest in property.Impact of policy and funding changesOnly a small number of TSOs noted any significant changes in demand for theirservices, with some reporting lower numbers of referrals (this was due to changes inhow statutory services identified clients) and others reporting increased demand dueto other agencies closing down. 3
  9. 9. The impact on service provision had been minimal despite funding being (at best) ata standstill and (at worst) a 15% cut. While some TSOs had had to make reductionsin some services because of cuts, most had avoided this by absorbing the effectsthrough making costs savings elsewhere or using accumulated underspends fromprevious years. However, the latter in particular was not a strategy that wassustainable into the next financial year.TSOs were keen to minimise the impact of cuts or standstill funding on clients,although choice and flexibility for clients were threatened, in particular the provisionof more expensive outreach services.The impact of the policy and funding changes had been felt most acutely by staffwithin TSOs. There had been redundancies, reduced hours, changes to terms andconditions of staff contracts as well as increased workloads. This had created ageneral atmosphere of uncertainty and anxiety among many staff in TSOs, in somecases having a negative impact on staff morale.Third sector responses and challengesResponding to funding opportunities and the potential for ‘strategic drift’There was a potential tension for some TSOs between adapting their services toever-changing policy priorities on the one hand and maintaining their organisational“identity” on the other. This concern over the potential for ‘strategic drift’ had ledmany to recently take stock through strategy reviews which refocused and definedtheir purpose and strategic direction.Organisational reviewsStrategic plans had been developed within a number of organisations. These aimedto identify what organisations needed to do in order to survive and develop andprovide a strategy to achieve these aims. These helped to guide organisationsthrough particularly challenging times.Making cost savings and remaining competitiveMany TSOs were looking at how they could make cost savings and remaincompetitive, thereby improving resilience. Strategies explored by organisationsincluded: • Organisational restructuring • Redundancy planning and reducing staff costs • Considering how to best utilise property assets, through for instance, property rationalisations (closing satellite offices and centralising into one space) • Mergers with other organisations. 4
  10. 10. Diversifying the funding base and social enterpriseMany TSOs were thinking about how to diversify their funding base to become lessreliant on public funding. Along with other activities such as organisational reviewsand making cost savings to remain competitive, this indicates an increasingly ‘socialenterprising’ approach to the management of TSOs. Many TSOs had also lookedinto the possibility of increasing income from business activity although this was notappropriate for all TSOs. Some were pursuing strategies to increase fundraising inorder to diversify their income.CompetitionThere was on-going concern about the challenges TSOs faced from potential publicand private sector competitors, particularly from local authorities who were alsopotential deliverers as well as funders of services.Governance and leadershipSenior management and Boards within TSOs faced a number of challengespresented by the changing policy and financial environments.The pace of change created a need for strong, consistent leadership and theprovision of direction to staff as well as challenges in maintaining staff morale andsupporting staff through the changes that were happening. This demanded skills inmanaging change as well as leadership. Managers in smaller organisations oftenhad to embrace a wider range of roles since increasingly important specialist supportroles were not available to them, e.g. marketing, information technology, humanresource management and operations management.Board of Directors and/or Trustees of TSOs could potentially offer valuable skills,knowledge and experience to support CEOs/Directors in their role. A number oforganisations noted a welcomed increase in involvement of their Boards over the lastyear in order to support organisations in meeting the challenges. A good spread ofknowledge and experience among Board members was valued, and having somemembers from the private sector could provide valuable business experience.Performance and outcome measuresA number of TSOs felt that funders had become more focused on measuringoutcomes within the last year, and in particular ‘soft’ outcomes. As TSOs felt thiswas an area they could particularly add value, this was generally welcomed.In order to demonstrate the value they added to the client experience, someorganisations provided additional evidence to funders on the impact their service hadon clients over and above what was formally required.A number of organisations continued to explore innovative ways in which todemonstrate client progress to clients and funders. This was a particular challenge 5
  11. 11. for clients with complex issues or where literacy and numeracy was low. Also therewas no standardised way of measuring outcomes. Some had looked at usingexisting tools while others were involved in the development of new tools.Partnership workingTrends in partnershipTSOs were aware of the importance of partnership working as a means of meetingthe challenges created by the policy and funding changes. Accessing funding was akey driver for partnerships and many were keen to be involved in more ‘joined up’working. Opportunities for partnership working appeared to be on the increase, butthe impact of funding cuts on their existing partners presented a potential futurethreat.Third sector infrastructureIntermediary bodies are those TSOs that exist to support the work of other TSOs.The research examined knowledge and involvement of TSOs in third sectorinterfaces. Since April 2011, each local area in Scotland has had its own third sectorinterface which aimed to provide a single point of access to support and advice forthe third sector within the local area. However, many TSOs were not aware of thenew interfaces, and of those that were, there was a mixed response. While somewere supportive of the principle, others were concerned about the potentialeffectiveness of the interfaces, especially for TSOs who worked across a number ofdifferent local areas.Many felt that the SCVO (and indeed the local infrastructure bodies) provided auseful forum for representing the interests of the third sector and for supporting itswork. However, others were concerned about a potential conflict of interest forSCVO as a service provider and about the ability of SCVO to represent the sector asa whole.Membership forums, often representing particular interests, were valued most interms of offering a platform to influence policy. Direct links with the ScottishGovernment, where accessible, were also highly valued.Partnerships with local authoritiesMany TSOs had good relationships with local authorities, and a number reportedimproved communication and dialogue with more opportunities to discuss howservices could be organised in the light of cuts. However, others found difficultiesaccessing local authority staff, particularly where the local authority had undergonemajor departmental restructuring. 6
  12. 12. Involvement in service designThe system of competitive tendering usually involved a funder specifying the servicerequired with limited scope for contractors to input into service design. Although justout of the pilot stage, Public Social Partnerships offer the potential for greaterinvolvement of the third sector in the design of public services. Increased dialoguebetween local authorities and TSOs around services and the possibility of more opentendering may offer opportunities for TSOs to become more involved in the future.ConclusionsIn Year Two the all-pervading message was that of change and uncertaintystemming from new policies and funding programmes coming out of the new UKCoalition government as well uncertainty about the outcome of the Scottish electionsin May 2011. As one service manager noted, ‘there is nothing surer than change’.This could create challenges for organisations, not least the rapid pace of changeitself. Nevertheless, many were positive that the changes could create opportunitiesfor improvements in the third sector.Many TSOs were making significant efforts to respond positively and proactively tothe challenges presented by the changing funding and policy environment. Manyhad taken the opportunity to look at their priorities and how they wanted to moveforward. The majority had looked at a variety of strategies to cut costs and remaincompetitive, as well as diversifying the funding base (and social enterprise inparticular). This presented challenges to leadership and governance, but seniormanagement and Boards of TSOs were, on the whole, rising to meet thesechallenges. This suggests that many TSOs are taking a dynamic approach tochange.It is important to recognise that there is no reductive response to the currenteconomic climate, no ‘one size fits all’. For some TSOs, mergers are an appropriateresponse, for others they may not be. It is also important to recognise that innovationis only one response to the current situation. For others a more cautious ‘sticking tothe knitting’ may be more appropriate. Proactive responses, like mergers andinnovation, appear to offer creative ways to respond to these straitened times.However they can also consume resources at a time of resource scarcity. What thefindings of this report suggest is required is a contingent response by TSOs thatmatches the response to the needs of their organisation, members and/or users.A number of TSOs were also rising to the challenge of measuring ‘soft’ outcomes,particularly in relation to clients with complex needs and/or whose literacy andnumeracy were limited. Some had made significant steps towards adapting and/ordeveloping tools which would both demonstrate client progress to the clientthemselves as well as show the added value of the service to funders. While therewas still no standardised way of measuring outcomes, some TSOs were makingimportant steps towards developing tools flexible enough to be applicable across anumber of different projects and funders. 7
  13. 13. TSOs were aware of the importance of partnership working as a means of meetingthe challenges created by the policy and funding changes. Many were keen to beinvolved in more ‘joined up’ working and were taking advantage of increasedpartnership opportunities, but the impact of funding cuts on their existing partnerspresented a potential future threat. The intermediary bodies that appeared to bemost successful in offering TSOs a platform to influence policy were specialistpartnership forums (e.g. membership forums) and those with direct links withgovernment. The experience of partnership working with local authorities varied,with some reporting better communication and dialogue while others reported lowerlevels of contact. There were indications that opportunities for involvement in servicedesign by the third sector may be increasing, although it was too early to be certain ifthese would effectively materialise. 8
  14. 14. INTRODUCTION1.1 This report outlines findings from year two of a three-year research project examining ‘The Changing Public Services Landscape in Scotland: Opportunities and Challenges’. This report builds on and extends the research reported in the Year One baseline report 4. This work was commissioned by the Scottish Government and using qualitative case studies and focus groups aims to track the way in which a selection of third sector organisations (TSOs) respond to the changing opportunities and challenges over a period of three years starting from 2009/2010.1.2 The Scottish Government has acknowledged that the third sector has a key role to play in delivering public services that are high quality, continually improving, efficient and responsive to local people’s needs. This work will inform future partnership-working with the third sector.1.3 The first year of the research (see Year One report) established a ‘baseline’ by which subsequent years of research could be compared. As part of that, specific objectives for the first year of research are summarised below: • identify the role and distinctive added value of TSOs delivering public services; • identify features of effective partnership-working between the public sector and TSOs; • assess the impact of Scottish Government and local government policy and budget priorities on TSOs’ changing practice and management; • track the impact of the economic downturn and budget limitations on TSOs’ roles in public service delivery; • describe how TSOs contribute to progress on the Scottish Government’s national priorities and national outcomes; • describe how TSOs contribute to progress on Single Outcome Agreements and the work of Community Planning Partnerships; • enable TSOs to articulate views on the appropriateness of funders’ oversight, evaluation and management procedures.1.4 A full list of objectives as outlined in the original specification are provided in Appendix A.1.5 The Year Two research aimed to build on and extend these original objectives as well as responding to emerging policy. At a meeting of the Research Advisory Group in February 2011 5, the members agreed that the focus of the Year Two research should include the following:4 Osborne, S., Bond, S., Dutton, M and E. Honore (2011) The Opportunities and Challenges of the ChangingPublic Services Landscape for the Third Sector in Scotland: A Longitudinal Study Year One Report: BaselineFindings, Edinburgh: Scottish Government5 Research Advisory Group Minutes of the Meeting, held at Scottish Government, Victoria Quay, Edinburgh on 9February 2011 9
  15. 15. • Relationships/ partnerships  Especially involvement of TSOs in Services Design (co- production)  Views of new local infrastructure (interfaces) and third sector engagement at local level  Other partnerships • Financing the third sector • Outcome measurement (SROI and other impact measurements) • Leadership and governance • Policy changes/ election context • Delivering high quality services (case study examples).Methodology1.6 The methodology involved qualitative research within 20 voluntary sector organisations based in Scotland. The methodology involved two key components: (1) in-depth case studies with eight TSOs and; (2) three focus groups involving twelve additional TSOs.1.7 Case studies for the Year One (Baseline) were carried out between December 2009 and May 2010 and for the focus groups between April and June 2010. The results were reported in the Year One report.1.8 Case studies for Year Two were carried out approximately one year after the first visit with organisations (between January and June 2011). Focus groups were carried out at six monthly intervals following the baseline meeting. This report covers key findings from two waves of focus group meetings which were carried out between October and November 2010 and April and May 2011.1.9 In addition, a workshop was carried out in June 2011 at Edinburgh University Business School. Representatives from all participating organisations were invited to attend, with 11 signing up. Seven participants attended, with apologies from a further four who could not attend at the last minute. The workshop included a presentation of the Year One findings by Professor Stephen Osborne followed by a discussion involving all participants. Notes were taken on the discussion, and where appropriate, issues discussed are referred to in the report.Initial selection of case study and group work organisations1.10 Following discussions with the Scottish Government and the Research Advisory Group, a framework was developed for the selection of research 10
  16. 16. participants. This was designed to ensure the establishment of a purposive sample of organisations working in different: • policy areas (with a mix of social care, healthcare, and employability/economic development/regeneration providers); • geographies (based in different locations across Scotland); • scales (with a mix of larger and smaller organisations included); • and to include some social enterprises.1.11 The selection of focus groups was based on similar lines with individual focus groups bringing together organisations with strong agendas in the following areas: (a) equalities; (b) social care and health care, and (c) employability/economic development/regeneration.1.12 Potential participants were identified through a database of 685 possible organisations provided through the Scottish Council for Voluntary Organisations (SCVO). The final selection of possible organisations was made in order to achieve the balance required by the framework above. All organisations were then contacted and invited to take part in the research for a period of three years as either: (1) a case study carried out once a year; or (2) to participate in a focus group carried out twice a year. Most first choice organisations were happy to participate, with the few who declined being replaced by other suitable organisations. In this way, the baseline sample of organisations was obtained.In-depth case studies1.13 In-depth case studies were carried out within eight third sector organisations between January 2011 and June 2011.1.14 In-depth face-to-face interviews were carried out with staff at different levels of the organisation. These included: chief executives; other senior officers/managers; research/policy officers; business/planning managers; operational and line managers; front line staff delivering. The selection of staff for interview was decided in consultation with the main contact from the organisation (usually the chief executive or another member of the senior management team) and the actual staff interviewed varied depending on the size of the organisation and availability of appropriate functions. A list of interviews carried out within each organisation for Year Two can be found in Appendix B. A copy of the main interview schedule used in Year Two is attached in Appendix D.1.15 In Year Two the main contact was again approached and asked for an interview and permission to follow up staff contacted in Year One. If original staff were not available for interview, where possible, other staff covering a similar role were identified and interviewed. In one organisation access was restricted to a smaller number of participants due to resource issues. A very small number of staff either did not reply to invitations to be interviewed, or there were difficulties in arranging available interview dates within the research timeframe. 11
  17. 17. Three focus groups1.16 Twelve organisations were divided into three focus groups of four participants. Each focus group pulled together organisations with strong interests in particular areas. These included: (a) equalities; (b) social care and health care, and (c) employability/economic development/regeneration 6.1.17 One representative from each organisation (usually the Chief Executive or a member of the senior management team) attended one of the focus groups carried out between October and November 2010 and April and May 2011. Where an organisational representative was unable to attend the focus group, telephone interviews were conducted. A common discussion framework was used – See Appendix D & E.1.18 Following the focus groups in Year One, one participant left the TSO and her successor was unable to continue the participation on behalf of that organisation. However, another organisation was approached and agreed to take part in the focus group research. An initial interview was carried out with the new participant in December 2010 and this member joined the focus group for the first time in Year Two.Anonymity1.19 In order to protect the anonymity of individual respondents who took part in the research, quotes have been labelled with generic job titles (e.g. Senior Manager, Manager, and Officer). A brief description of the type of organisation is also provided after each quote. Additional background information on the participating organisations is provided in Appendix C. This is intended to give context to the overall report and individual quotes without revealing the identity of participating organisations. All organisations were happy to be identified as taking part in the research (although not necessarily to have particular opinions credited to them). All participating organisations approved the approach to anonymisation that has been used. A full list of participating organisations is available on the project website at http//www.thirdsectorproject.org.Analysis1.20 The first stage of the qualitative longitudinal research was to design a thematic analysis framework. This was based on the framework used in Year One (baseline). This provided a flexible common core framework which enabled ‘comparability over time and between projects’ for which ‘the use of common data collection tools and reproducible modes of analysis are suggested’ 7 .6 Note that these categorisations were not applied rigidly and there was some overlap in the activitiesof organisations.7 Holland, J. (2007) Issues in Qualitative Longitudinal Research; Workshop held at London South Bank University2007, p.10. 12
  18. 18. Thematic analysis has been carried out on individual focus group and case study data collected in Years 1 and 2. This analysis provided the basis for the longitudinal analysis as well as providing more detailed cross-sectional data, including quotes, which are used in the report.1.21 For the longitudinal analysis, later data were then added to the earlier data within the thematic framework enabling accounts provided by different respondents at different points in times to be easily compared. In order to organise the longitudinal analysis, the method proposed by Lewis (2007) 8 was employed. Individual focus groups and case studies were subjected to a longitudinal analysis comparing data collected in the waves. This was done for each group/case study in Microsoft Excel. This data was then integrated (in Microsoft Excel) across all groups and case studies. In this way, a summary analysis of key changes between the waves was enabled and forms the basis of this report.1.22 Please note that much of the report is based on the views and perceptions of interviewees within this selection of third sector organisations. These views are individual’s opinions and are therefore subjective.Methodological challenges1.23 The longitudinal qualitative nature of the research presents an unparalleled opportunity to track the dynamic of change over time. However, this also presents challenges including issues of attribution, policy changes and attrition.1.24 Attribution is being able to attribute changes to a specific cause. However, TSOs in Scotland operate within a complex and changing policy context, with policy emerging from different levels. The UK and Scotland level are particularly important for policy, but also policy emerging from (and interpreted through) local authorities, regulatory bodies and Europe form part of a complex background. There is also often a time lag between policy announcements and the actual impact on TSOs since these can be mediated via other bodies (e.g. local authorities in particular). Where possible the report identifies the key links, but it would be too simplistic to assume that causal links always exist or that they are straightforward in nature.1.25 Over the course of a number of years, it is likely that the circumstances of organisations or individuals may change in a way that means they can no longer continue in the research (attrition). Fortunately, by Year Two of the research attrition had been minimal. Of the 20 organisations taking part in Year One (Baseline), only one focus group participant was unable to continue. However, a replacement organisation was found whose Director was able to take part in the subsequent years.1.26 There was some attrition of interviewees within case study organisations. This was because of staff leaving the organisation, being unable to set up interviews8 Lewis, J. (2007) ‘Analysing Qualitative Longitudinal Research in Evaluation’ in Social Policy & Society, Vol. 6,No. 4, pp. 5455-556 13
  19. 19. within the timeframe or because access was restricted by the key contact. Where possible, alternative participants were interviewed.Structure of the report1.27 The findings from the research begin in Chapter 2 with an examination of the key Changes to the Policy and Funding Environment. These include: • policies emerging from UK Government and Scottish Government; • tendering including funding cuts and new opportunities, and access to loan finance; and, • some of the impacts on TSOs resulting from the policy and funding changes, including changes in demand for services; impact on service provision; impact on clients; and impact on staff.1.28 Chapter 3 explores Third Sector Responses and Challenges to the changing environments. This chapter examines: • how TSOs have been responding to changing funding opportunities and the potential challenge of ‘strategic drift’; • organisational reviews; • making cost savings in order to remain competitive including: restructuring, redundancy planning and reducing staff costs, property rationalisations, mergers and the impact on internal capacity; • the approach of TSOs to diversifying the funding base and social enterprise; • the challenges of competition for TSOs, and; • governance and leadership.1.29 Chapter 4 examines trends around Performance and Outcome Measures. This includes: measuring ‘soft’ outcomes; providing additional evidence to funders; using additional measures to demonstrate impacts, and; use of Social Return on Investment (SROI).1.30 Partnership Working (Chapter 5) examines trends in partnership working reported by TSOs. This chapter also looks at: Third Sector Infrastructure such as awareness and involvement in Third Sector Interfaces; relationships with SCVO and local CVSs and involvement in other partnership forums. Finally, this sector examines partnerships with local authorities and involvement in service design.1.31 Throughout the report and under relevant chapters, case study examples are outlined giving details of practices within individual TSOs.1.32 Finally, a Conclusion is provided in Chapter 6.1.33 All quotes use generic pseudonyms which are intended to provide some organisational and respondent role context without identifying either individuals or organisations. However, please note that the generic pseudonyms cannot encapsulate the varied roles of TSOs, especially since many organisations fall 14
  20. 20. into numerous categories, but they are necessary for convenience. Appendices B and C provide more details about each organisations. Where quotes have been taken from a focus group discussion this is indicated in brackets after the quote (e.g. Employability FG where FG indicates ‘focus group’).1.34 Interview guide questions used in the fieldwork are appended (Appendix D and E). 15
  21. 21. 2 CHANGES TO THE POLICY AND FUNDING ENVIRONMENTChapter SummaryThis chapter outlines the key changes to the policy and funding environment during2010 and early 2011 that were relevant to TSOs in Scotland. The impact of theseon the organisations, their clients and staff is also explored.Changes to the policy environmentAs well as cuts to public sector funding, other key changes in the policyenvironment at UK Government and Scottish Government level included:The introduction of the Work Programme across the UK replaced existingemployability streams with a significantly different method for contracting services.This had the potential to have a major impact on TSOs who provided employabilityservices in Scotland, although at the time of the research the outcome was not yetclearThe Welfare Reform Bill in the UK had started to have adverse effects on someTSOs and their clients, particularly those working with single parents, carers andpeople with disability.Personalisation (or self-directed support) in Scotland was becoming increasinglyimportant on the agenda of TSOs providing services in health and social care.Most were supportive of the principle of devolving power to service users with anumber of TSOs already keen to develop personalisation for their own services.The shifting nature of policy priorities presented on-going challenges andopportunities for TSOs. The perceived low priority of volunteering in policy was anissue for some TSOs who relied on a volunteer base, while it was not entirely clearhow the ‘Big Society’ agenda would impact in Scotland. The context of ever-tightening resources meant regulation had become increasingly burdensome forsome. Variations in policy priorities between local authorities remained an on-going issue.Changes to the funding environmentIncreasingly, tendering was the main method by which funding was contracted.However, there were variations in approaches between local authorities and nostandardised approach on which services should formally go out to tender. Therewere tentative indications that some local authorities might be moving towardsallowing more input from TSOs into service delivery plans. There was also an on-going concern around the emphasis on cost rather than quality in funding decisions.Most of the spending cuts were expected from April 2011 and therefore after mostof the year two fieldwork had taken place (Jan-March 2011). However, prior to thisdate actual cuts had been relatively limited. However, funders had attempted to 16
  22. 22. save money prior to April 2011 through standstill funding, cutting and changingconditions to existing contracts and re-appropriating underspends.Despite anticipated cuts, many TSOs felt that new opportunities might emergethrough more contracting out by local authorities, new policy priorities as well asgaps created by other TSOs closing down.Many TSOs had not considered applying for private loan finance because they hadlimited assets, security and private incomes, although a small number had beenable to successfully access this source of income in order to invest in property.Impact of policy and funding changesOnly a small number of TSOs noted any significant changes in demand for theirservices, with some reporting lower numbers of referrals (due to changes instatutory services identification of clients) and others reporting increased demanddue to other agencies closing down.The impact on service provision had been minimal despite funding being (at best) ata standstill and (at worst) a 15% cut. While some TSOs had had to makereductions in some services because of cuts, most had avoided this by absorbingthe effects through making costs savings elsewhere or using accumulatedunderspends from previous years. However, the latter in particular, was not astrategy that was sustainable into the next financial year.TSOs were keen to minimise the impact of cuts or standstill funding on clients,although choice and flexibility for clients was threatened, in particular the provisionof more expensive outreach services.The impact of the policy and funding changes had been felt most acutely by staffwithin TSOs. There had been redundancies, reduced hours, changes to terms andconditions of staff contracts as well as increased workloads. This had created ageneral atmosphere of uncertainty and anxiety among many staff in TSOs, in somecases having a negative impact on staff morale.Introduction2.1 The Year One report outlined the policy background and context within which TSOs in Scotland operated at that time. Many of these remain relevant in Year Two. Some of the key factors highlighted in the Year One report included: • The Scottish Government’s commitment to promoting high quality public services and the importance of the third sector in on-going public service reform. • The 2007 Concordat between the Scottish Government and local government which reduced ring-fencing and devolved control of some budgets to local authorities (LAs) and Community Planning Partnerships 17
  23. 23. (CPPs). This fundamentally changed the relationship between national and local government in Scotland. This aimed to promote the alignment of funding and activities within local authorities and other areas of the public sector with the Scottish Government’s priorities and national outcomes. Key tenets of the Concordat were:  Collaborative working and joint accountability - the relationship between central and local government to be based on mutual respect and partnership to enable local authorities to respond more effectively to local needs by reduced micro-management;  Reduced bureaucracy - reduction in the number of funding streams and monitoring and reporting to central government and a more focused and proportionate inspection scheme;  Single Outcome Agreements (SOAs) – to be established between central government and each of the 32 local authorities with the aim of aligning policy with overall government targets, taking account of local priorities. From 2009-10 Single Outcome Agreements (SOAs) were to be agreed with Community Planning Partnerships rather than local authorities.• A major programme of change in third sector infrastructure with the announcement in March 2008 that as of April 2011 the Scottish Government would no longer fund networks of Councils of Voluntary Service (CVSs), volunteer centres, local social economy partnerships and social enterprise networks in their current form. This led to the development of new third sector “interfaces” in each community planning area in Scotland which typically involve the networks listed above. The interface is the means by which the third sector is represented on the CPP.• The Enterprising Third Sector Action Plan (2008-2011) which aimed to support enterprising behaviour in the third sector, including the Scottish Investment Fund (£30M) and the Enterprise Fund (£12M).• The public-social partnership (PSPs) model involving the public sector and the third sector working in partnership to design and deliver public services which was piloted from 2009.• The Social Return on Investment model (SROI) as a means of measuring how TSOs deliver social and environmental benefits• The Third Sector Task Group created in 2008 for a fixed term with a specific remit to improve coordination of third sector organisations in Scotland, local authorities and the Scottish Government. The main output from the Task Group was the “Joint Statement” on the Relationship at Local Level between Government and Third Sector signed by Scottish Government, COSLA, Local Government and the third sector and offering recommendations on working relationships in relation to funding, shared 18
  24. 24. services, Best Value, application processes for grant funding, strategic commissioning and procurement, re-tendering, European Procurement Law, monitoring, reporting and evaluation and partnership. • The economic downturn and the current and future budget constraints and their potential impact on the third sector in Scotland.2.2 In addition, since the fieldwork was carried out for the Year One report (December 2009-May 2010), there have been a number of key events in the UK policy environment. These include the formation of the Conservative- Liberal Democratic Coalition Government in May 2010. There have been a number of emerging relevant policies as a result including the introduction of the Work Programme which replaced existing employability funding streams and the Welfare Reform Bill (February 2011). These will be explored in depth in relation to their impact on TSOs later in the report (See 2.12-2.22).2.3 On-going is the UK Government policy of deficit reduction resulting in spending cuts within the public sector. This has resulted in a reduction of the Scottish Budget in 2011-12 of £1.3 billion compared with the previous year which will translate into spending reductions of over 11 per cent in real terms between 2010-11 and 2014-15 9.2.4 The SNP minority-led Government set up the Commission on the Future Delivery of Public Services (Chaired by Dr Campbell Christie) in November 2010 in order to “examine how Scotlands public services can be delivered in the future to secure improved outcomes for communities across the country”, despite the challenging financial environment. The Commission reported in June 2011 10 and identified the following key priorities: • Recognising that effective services must be designed with and for people and communities, not delivered top down for administrative convenience • Maximising scarce resources by utilising all available resources from the public, private and third sectors, individuals, groups and communities • Working closely with individuals and communities to understand their needs, maximise talents and resources, support self reliance and build resilience • Concentrating the efforts of all services on delivering integrated services that deliver results • Prioritising preventative measures to reduce demand and lessen inequalities • Identifying and targeting the underlying causes of inter-generational deprivation and low aspiration • Tightening oversight and accountability of public services, introducing consistent data-gathering and performance comparators to improve services9 Scottish Government (2010) Scotland’s Spending Plans and Draft Budget 2011-2012, Edinburgh: ScottishGovernment. Available at: http://www.scotland.gov.uk/Resource/Doc/331661/0107923.pdf10 http://www.scotland.gov.uk/News/Releases/2010/11/19124547 19
  25. 25. • Driving continuing reform across all public services based on outcomes, improved performance and cost reduction • Implementing better long-term strategic planning, including greater transparency around major budget decisions like universal entitlements. 112.5 As the Christie Commission reported after the Year Two research was completed, it was too soon to gauge the implications of the report for the TSOs.2.6 In addition, the Scottish elections took place in May 2011. Although the outcome was unknown when much of the fieldwork was carried out, this formed a significant backdrop for many of the TSOs. Along with many of the policies discussed in the Year One report, personalisation had moved up the agenda for a number of organisations by Year Two (and since the SNP formed a majority government in Scotland from May 2011 will continue to do so). Again, this is discussed in more detail later in the report (see 2.23-2.32).2.7 Table 1 below presents a timeline of key policy events which have the potential to impact on TSOs in Scotland. These are set against the fieldwork timetable to highlight the timeframe within which these might have an impact. However, there is likely to be a time lag in many instances between policy announcements and impacts filtering through to TSOs and it is overly simplistic to assume a direct causal relationship between a policy event and change in the third sector (the attribution problem). The timeline is intended to set out a broader political context within which the study took place.11 Commission on the Future Delivery of Public Services (2011) Report on the Future Delivery of Public Servicesby the Commission chaired by Dr Campbell Christie. Published on 29 June 2011.http://scotland.gov.uk/Publications/2011/06/27154527/2 20
  26. 26. Table 1: Policy and fieldwork timelineDate UK Government Scottish Government Fieldwork2007 SNP minority government elected Concordat2008 Enterprising Third Sector Action Plan 2008-2011 published £30M Scottish Investment Fund opened Process of creating Third Sector Interfaces began2009 Future Jobs Fund launched Joint Statement between Scottish Government, COSLA, Solace Scotland and SCVO2010 JanFeb Self-Directed Support Strategy ConsultationMar Public Services Reform Bill AprMay Coalition Agreement YEAR ONEJuneJulyAugSep OctNov Work programme competitionDec Self-Directed Support Draft Bill Launch of Christie Commission on Future Delivery of Public Services2011 JanFeb Welfare Reform BillMar Child Poverty Strategy Apr All 32 Interfaces in place YEAR TWO Scottish Investment Fund extended until March 2012 with additional £3M fundingMay SNP majority government electedJune 21
  27. 27. Changes to the policy environment2.8 Between Years 1 and 2 significant changes in the policy environment occurred: firstly, the election of the UK Coalition government in May 2010 and the various new policies emerging from this new government; secondly, the Scottish elections in 2011. Although most of the field work was carried out prior to the elections, they formed an important part of the changing context for many organisations.2.9 The Year One report outlined issues relating to current policy, particularly in Scotland, at that time. These included issues relating to the Concordat, including the ‘localism’ agenda and community planning partnerships. The long- term general UK and Scotland trend towards increased focus on employability at that time was also noted. While the issues raised in the first year remained on-going, subsequent years aimed to explore key changes to the policy environment that took place in the intervening period and the impact these had on third sector organisations. Key policies emerged at different levels, in particular from the UK government level and the Scottish Government level, but also policy via the local authority level.2.10 Broadly, UK government policy was more relevant to TSOs focusing on employability (as a non-devolved issue), while for TSOs specialising in health and social care, policy at the Scottish Government level was more pertinent. However, there was often overlap in the activities of TSOs, and policy at different levels affected most TSOs to some extent.2.11 This section begins with an overview of the impact of policy changes in terms of creating increased change and uncertainty for TSOs. This is followed by a closer examination of key UK government policy in terms of the Work Programme and the Welfare Reform Bill. At the Scottish Government level, this section examines key policies of personalisation and other policy priorities. There is then a brief overview of some issues raised by TSOs in relation to regulation, followed by an overview of policy at local authority level.UK Government policyThe Work Programme2.12 A key change for a number of participants, particularly those involved in the delivery of employability services, related to the change at Westminster. In particular, the introduction of the Work Programme which replaced existing employability funding streams 12.2.13 The programme aims to get long-term unemployed people back to work with the use of third-party suppliers. The programme will select a small number of12 For further information on the Work Programme see http://www.dwp.gov.uk/policy/welfare-reform/get-britain-working/#work 22
  28. 28. ‘prime contractors’ to deliver services in specific regions across the UK. The prime contractors need to have substantial resources in order to operate the programme. This is because the programme is based on payment by results (e.g. a client gaining and/or keeping a job), so the majority of payments to providers would only be made, for instance, after a person previously on benefits starts work. The prime contractors are then expected to sub contract specific areas of work to other organisations. Hence, these organisations are likely to be smaller specialists. In consequence, many partnership networks around possible prime contractors had been and were being established.2.14 At the time of much of the Year Two fieldwork, the outcomes of the Work Programme bidding process were unknown since funding allocations were not announced until April 2011. Some TSOs felt the Work programme offered significant opportunities for new areas of funding. However, the programme also required significant adaptations (in terms of partnerships required, tendering processes, measuring outcomes and potentially service delivery) from the third sector organisations involved, particularly those used to contracting under the pre-existing employability funding streams. Funding through the Work Programme could only be accessed by a relatively small number of very large organisations and this had created the need to develop both new and existing partnerships in order to tender for the contracts. Some felt that this had been particularly time-consuming and there was also a lot of uncertainty among the TSOs who were hoping to get funding from the Work Programme: The whole process [contracting via the Work programme] has been really drawn out and incredibly complex because of the numbers of potential primes you are dealing with and I sincerely hope that the DWP dont do further tenders in this way. Senior Manager, Local Employability Provider2.15 Since it was uncertain which organisations would succeed in their bids to become the ‘prime’ e.g. main contractors, there was a potential need for TSOs to try and link with as many of the potential prime contractors as possible in order to have an opportunity to continue to deliver employability services. Some also felt that it was unclear how much of the budgets would be passed down to smaller sub-contractors from the main contractors.2.16 When the results were announced in April 2011, the two prime contractors in Scotland selected were both private sector organisations and there was some concern expressed by those interviewed after that date that the third sector had been sidelined; a sentiment echoed by the Labour party and others in Scotland 13. One participating TSO who took part in the research shortly after the announcement of the work programme results was disappointed to have been unsuccessful in bidding for a major contract. This resulted in the loss of13 For instance, http://news.stv.tv/election-2011/242237-award-of-work-programme-contract-criticised/ 23
  29. 29. significant funding for them in the short-term although there was potential to pick up some funding as a sub-contractor at a later stage.2.17 There was also some concern as to how the new payments-by-outcomes would operate in practice and how it would affect the cash flow in smaller sub- contractors. There would also be a transition period between March and June 2011 for some TSOs where existing employability contracts ended and before Work Programme funding started creating uncertainties for staffing.2.18 In summary, there was a great deal of uncertainty among TSOs around the Work programme. For some it presented potential opportunities for new funding, but for others the concerns included: who would be successful in contracting or sub-contracting to deliver services; for those that were involved, how the programme would work in practice; for those who were unsuccessful, how they would fill the funding gap.Welfare Reform Bill2.19 There were also changes to policy related to the UK Spending Review, and later the Welfare Reform Bill (February 2011), such as changes to benefits for lone parents and disabled people and changes to housing subsidy. The reforms include, amongst other things 14: • the introduction of the Personal Independence Payment to replace the existing Disability Living Allowance which requires existing claimants to be reassessed for the benefit • restricting Housing Benefit entitlement for social housing tenants whose accommodation is larger than they need • caps on the total amount of benefit that can be claimed • the introduction of Universal Credit to replace different and separate existing benefits, such as employment support and housing benefit • changes to the child support system.2.20 The impacts of these policies had started to filter through to TSOs by Year Two. One TSO had started to experience lower income because of the caps on housing benefits. However, the impacts were mostly around the client groups. In particular, TSOs mentioned the impacts on single parents, carers and people with disabilities. For instance, they reported that some clients had experienced loss of confidence and increased anxiety, as well as being distracted from their activities with the TSOs: Their anxieties are around this area [reviews for disability benefits] so we spend a lot of time focusing in on that rather than the actual job in hand which is getting people into employment. Senior Manager, Local Employability Provider14 http://www.dwp.gov.uk/policy/welfare-reform/legislation-and-key-documents/welfare-reform-bill-2011/index.shtml 24
  30. 30. 2.21 There was some concern that this had resulted in less specialist and more generic help being available to clients by large employability providers and those processing Job Seekers Allowance (JSA), i.e. TSOs were not individualising the support provided to specific clients and their needs, but treating them all in the same way.2.22 In addition, there was concern that the UK policy emphasis on protecting ‘front- line’ services would lead to preventative services being perceived as a luxury, and would suffer cutbacks as a result.Scottish Government policyPersonalisation2.23 Personalisation (also called ‘self-directed support) has become increasingly important in the UK and Scottish policy agendas. This gives adults with special needs direct control of designing their own services by sharing with them, or giving them, responsibility for the funding of their services. There is an unresolved debate about whether this is a model that empowers individuals by giving them direct control over the finances of their services or disempowers them by disaggregating and isolating individual service users. Although ‘direct payments’ 15 have been around for over a decade 16 , the development of personal budgets is more recent and was given a boost with the Convention on the Rights of Persons with Disabilities which came into force in 2008 17 . In Scotland, The Changing Lives report considered the role of social work in supporting this change, not just for disabled people, but for all who require care and support 18. A consultation on self-directed support in Scotland in February 2010 was followed by a draft bill in December 2010 19.2.24 The Scottish Government defines Self-directed support (SDS) as The support individuals and families have after making an informed choice on how their Individual Budget is used to meet the outcomes they have agreed 20.2.25 The same report states that ‘SDS is often described as the personalisation of social and health care’ (page 9). We use the term ‘personalisation’ in this report since that this how most of the respondents referred to it.15 Direct payments are local council payments available for anyone who has been assessed as needing helpfrom social services. You can normally get them if you are a carer aged 16 or over.http://www.direct.gov.uk/en/CaringForSomeone/MoneyMatters/DG_1001851716 Dickinson, H. And J. Glasby (2010) The personalisation agenda: implications for the third sector, Third SectorResearch Centre17 Self-directed support: A National Strategy for Scotland, 2010, Edinburgh; Scottish Government18 Changing Lives: Report of the 21st Century Social Work Review Group. Edinburgh 2006http://scotland.gov.uk/Publications/2006/02/02094408/019 Social Care (Self-directed Support) (Scotland) Bill, Consultation Draft, Edinburgh: Scottish Government. Alsosee http://www.scotland.gov.uk/Topics/Health/care/sdsbill20 Self-directed support: A National Strategy for Scotland, 2010, Edinburgh; Scottish Government, page 7 25
  31. 31. 2.26 For TSOs working in health and social care, personalisation is increasingly important to the way in which their services are likely to be delivered in the future. This was mentioned by some in Year One, but it was in Year Two that it really came to prominence, with a number of Scottish Government consultations coming out during 2010 (see Table 1, Policy and fieldwork timetable, page 26).2.27 Personalisation was an agenda that had been particularly supported and promoted as policy by the SNP. Since most of the Year Two research was carried out prior to the Scottish Elections in May 2011, some TSOs were not sure what priority personalisation would have in the future if a non-SNP government was elected. However, many had already been preparing for personalisation and look set to continue to do so especially in the light of the SNP returning to power in May 2011.2.28 Many of those who discussed personalisation were supportive of devolving power to service users. One was actively involved in promoting personalisation, while another was focused on person-centred care and personalisation supported that agenda. These and others had been preparing for personalised and self-directed support for some time. However, others were anticipating the potential implementation to be more of a challenge. Issues raised by TSOs regarding the implementation of self-directed care budgets included: • the challenges of moving from institutional care provision to personalised care; • the potential for greater complexity in the management of staff rotas and payments for the provision of services; • adapting to the different way of funding presented by personalisation may require major changes to the way some organisations currently operated, although the exact nature of these was sometimes uncertain.2.29 Similar issues emerged in a discussion of the personalisation agenda which took place at the Workshop held in June 2011. On the one hand, this was described as having great potential to deliver excellent services through increased tailoring to individual needs, but conversely a challenge to organisations with little existing expertise in the area in order to be able to deliver personalised services. It was suggested that this theme was particularly important to some areas (e.g. Mental Health, Social Care where personalisation was being focused) but not across all TSOs.2.30 Some TSOs felt that personalisation had the capacity to change the way care was conceived, allowing more people to be supported in the community rather than in institutions (e.g. independent living) and care tailored to specific needs. However, some were concerned that personalisation was being used explicitly by some local authorities as a cost-cutting exercise and was not about a genuine reform of services 21. As a result they were concerned that less finance would be available to clients:21 though little evidence could be found to substantiate this fear at the time 26
  32. 32. This is a Scottish Government policy which has the best of intentions but in a changing environment is being used in some situations in a negative way, to cut budgets…Personalisation has, as a policy, the capacity to make significant improvements in service delivery and be the catalyst for positive change but the policy is being used to fast track change in a way that is having a negative influence on those who use services and those who deliver them….Having choice is great but it is limited by the resources that are available financially. Senior Manager, Health and Social Care Focus Group2.31 TSOs also pointed out that there were disparities across local authorities in the conceptualization and implementation of personalised social care leading to uncertainty and potentially variable access between clients living in different areas: In [one local authority area] personalisation appears to...be being implemented on the basis of cutting costs rather than on the basis of actually personalising services…in other places it has been done more with a view to trying to personalise services and in other places, they are just not doing it at all…It’s been a bit uncertain because there hasn’t been a uniform approach to it. Senior Manager, National Health and Social Care Provider2.32 Some TSOs thought that because personalisation was being introduced as a cost-cutting exercise by some local authorities (or was perceived to be), this had resulted in less enthusiasm and less support within some of the third sector to implement the agenda: Local authorities have approached [the personalisation agenda] with a specific mindset, as a cost-cutting exercise, so people [e.g. TSO’s] have not trusted it rather than grabbing it with both hands and running with it. Senior Manager, Health and Social Care Focus GroupOther policy priorities2.33 There was a wide range of Scottish Government policies that impacted on the TSOs who participated in this study, although these were often specific to the area within which a TSO worked. More generally, points were made about shifting policy priorities and the run up to the Scottish elections.2.34 The Year One report noted that there had been general policy shifts towards employability on the principle that work offered individuals positive outcomes. The Year One report also noted that there had been a shift to the provision of support for specific demographic and social client groups, such as older and younger people, people with addictions and BME communities. This move reflected the targeting of funding on specific groups. 2010/2011 were perceived to be years of particular change both at Scottish Government, UK Government and local authority level. Shifts in policy could favour some organisations to the detriment of others. For instance, one organisation 27
  33. 33. perceived that the greater emphasis within policy on early years could have a detrimental impact on their work with teenagers and young adults, whilst for another, the policy focus on sexual health had resulted in greater resources for their work. This raised issues for organisations about the extent to which they adapted their work to fit with changing policy priorities. Given the current period of particular change, this was prominent in the minds of many and is explored further in the next chapter; see particularly ‘Responding to funding opportunities and the potential for ‘strategic drift’, 3.3–3.7.Volunteering2.35 Another key policy area for some TSOs was that of volunteering, though it was by no means universal. For some TSOs volunteers were at the core of their organisational philosophy whilst for others they were a distraction from professionalised service delivery. Volunteering was also perceived to be low on the Scottish Government agenda. This dichotomy was reflected in the Project Workshop for study participants in June 2011. Some third sector attendees felt that there was a lack of focus on volunteers in the study, despite this being a core aspect of TSOs, whilst others felt it was a minor issue that distracted from the main concerns of the sector. The paradox between the expressed ‘added value’ of volunteers to the work of TSOs and the pressures towards professionalization of public service delivery by TSOs were highlighted. Volunteers in TSOs (for whom volunteers were a significant element of their organisation) were described as having high expectations of what they might gain from a TSO (e.g. experience, training, qualifications) but were not necessarily a reliable element of service delivery. Accountability processes at the local authority level were also highlighted as excluding volunteers from certain positions which required the guarantee of paid positions for health and safety/insurance purposes. 2.36 Prime Minister David Cameron’s ‘Big Society’ agenda was not raised as a model that had especial resonance for Scotland. There was little dissent from the aspirations of the agenda, though some did object to what they saw as the co-option of these ideas by the Conservative Party led UK Coalition government for their own ends. Further, many TSOs also felt either that the mechanisms outlined for the achievement of the ‘Big Society’ were, at best counter-productive and contradictory (such as arguing for an increase in third sector involvement in public services delivery whilst at the same time cutting funding to that sector) or that they were primarily an English policy and had little resonance with public policy in Scotland and the needs of Scottish communities 22 . However, one organisation did think that the ‘Big Society’ agenda meant a recognition of the value of the ethos and philosophy of the third sector.22 The Gathering Conference, the 7th Annual Third Sector Event, held 23rd and 24th February 2011 at theEdinburgh International Conference Centre. 28
  34. 34. Regulation2.37 TSOs are required to comply with a raft of regulations and monitoring requirements, some of which vary depending on the nature of the work with which they engage. These include, for instance: • Regulation, e.g. Care Commission regulation for those dealing with children, Scottish Social Services Council regulation for those providing social care; • Legislation, e.g. Health and Safety Compliance, Equalities and employment legislation; • Monitoring and compliance, e.g. related to funding requirements (See section on Performance and Outcome Measures, Chapter 4).2.38 However, in the context of ever-tightening resources these exercises could become increasingly onerous, particularly for small organisations. A couple of TSOs noted that increasing regulation required additional resources that were not provided for by funders.2.39 In one case, the social care practitioners within one TSO were required to register with the Scottish Social Services Council (SSSC). As a smaller community-based organisation in particular, this was a challenge. The cost of the staff training for SSSC registration was not covered by funders who are not bound to assist in the up-skilling of the social care workforce. Another TSO attributed this situation to the separation of regulation and funding: While the aim of the government was to improve standards, the fact that regulation and funding were devised independently led TSOs funders not to take on board the financing of training staff. Senior Manager, Health and Social Care Focus GroupLocal authorities2.40 The Year One report noted variations between local authorities in policy priorities. Earlier in the report, we reported that local authorities were perceived to be inconsistent in their approaches to personalisation. Variations in approaches between different local authorities continued to be a challenge for some TSOs, particularly those working across several different areas. Some of these challenges will be noted later in the report.Changes to the funding environment2.41 This section looks at key changes to the funding environment that occurred between Years One and Two. One of the key policies of the UK Coalition Government has been reducing the UK deficit of which reductions in spending on public services has been a key component. This section examines the 29
  35. 35. extent to which TSOs in Scotland have experienced funding cuts within the last year.2.42 This section also examines trends experienced in tendering as well as some of the new opportunities that may be opening up in the changing environments. Finally, this section examines perceptions and access to private finance for TSOs.Tendering2.43 The Year One report identified tendering as an important issue for many TSOs because increasingly this was the main way in which funding was decided. For many TSOs the era of grant funding from government was a historical one, largely being replaced by tendering for public services either on a negotiated or competitive basis. This was true across a range of funding sources including the EU funding, the UK Work Programme and Scottish Government and local authority funding in Scotland.2.44 While tendering created opportunities for TSOs it also created challenges. For example, many TSOs noted different approaches to tendering in different local authorities, creating problems for TSOs that worked across a number of authorities. One participant also noted that a couple of smaller local authorities were limiting tendering because of the cost of the process during a time of local authority cuts whilst another pointed out that there was no standard on what services would formally go out to tender and local authorities operated different policies. A final participant also noted a change to the way in which their local authority was tendering. The local authority had asked the TSO to present a costed service delivery plan 23. This participant felt this created opportunities for creativity but that the process ‘takes time and takes energy’ (Senior Manager, Local Employability Provider). She also felt that, at least in the employability field, this was a general trend in contracting.2.45 In Year One there was a common perception that funding decisions were based disproportionately on cost rather than quality and this was a trend that some felt was becoming increasingly so. Several were particularly concerned about the impact of cuts on the quality of services, particularly since many felt quality was an integral part of the ethos of their organisations. Some perceived that cost savings would need to be achieved by making a choice between quantity and quality, e.g. reduce front line hours but keep service quality or keep the hours but compromise on quality by reducing level of staff training or tie-in services 24.23 A formal plan (sometimes in the form of a tender or bid document) providing a detailed breakdownof services to be provided, how these will be provided and how much this will cost.24 Additional services that can be accessed by clients in order to support the existing service beingprovided. 30
  36. 36. 2.46 One TSO also felt that there was an increasing lack of clarity about funding processes (e.g. the application processes for grants beyond 2011 had not been decided at that time).2.47 However, some larger TSOs reported they were experiencing more opportunities to negotiate with funders around contracts. They had the capacity to potentially leverage in more funds (with more capital) and had more power in their relationships with local authorities. Some small TSOs, however, continued to feel that they had less bargaining power than some of the larger TSOs. Also see ‘Relationships with local authorities’ 5.23-5.26.Funding cuts2.48 In Year One many participants were anticipating public sector spending cuts over coming years creating uncertainty. However, at the same time potential opportunities were emerging, through new areas of funding opening up. By Year Two, many were anticipating the main spending cuts to come in April 2011 and therefore after most of the year two fieldwork had taken place Jan- March 2011). Prior to this date only some of the organisations had experienced actual cuts. However, participants reported other ways funders were attempting to save money before April 2011. For instance, as noted in the Year One report, funding continued to not cover the costs of inflation (standstill funding), cuts were made to existing contracts half-way through the contract period, underspends were re-appropriated by some local authorities and some funders had changed the terms of the funding agreements, so for instance, in one case this meant that only certain types of clients were now eligible to access the service.2.49 Where actual cuts were known, they tended not to be as high as the 20% some had been anticipating in Year One. The maximum funding TSOs had received was standstill funding (e.g. no inflation costs covered), while others had received between 5% to 15% cuts. However, some were still expecting major cuts in the forthcoming year, in one case up to 40% and a number were in the process of renegotiating existing service provision with local authority funders in order to meet the funding cuts required by the funders.New opportunities2.50 Despite the challenges faced by standstill funding or funding cuts, many TSOs also felt that new opportunities for funding were emerging. A small number of TSOs had received significant new funding since Year One (funding sources included the Big Lottery Fund, via the NHS and another had picked up a contract where the existing provider was no longer able to deliver the service).2.51 One respondent was anticipating that there would be more contracting out by local authorities (although as we found earlier this is likely to vary depending on individual local authority areas). Shifts in policy priorities at UK and Scottish Government level are likely to create opportunities in new policy areas. One 31
  37. 37. participant noted that some local authorities were creating new funding at the same time they were cutting others. Others were anticipating new programmes of funding depending on the outcome of the Scottish elections. Another felt that the outcomes-based payments approach (such as in the Work Programme) created opportunities for additional work for their organisation. A number of participants noted that some funding opportunities were likely to open up as existing small TSOs closed down, creating a number of small pots of money. For instance, one participant noted that this had happened in his field several years ago, leaving a smaller number of medium-sized TSOs.Loan finance2.52 Many TSOs had not considered applying for private loan finance. Some thought they would not be eligible because they had limited assets, security and private income. There were a number of issues limiting the ability of TSOs to access private loan finance, particularly for smaller organisations; in particular, having suitable security and ability to pay the interest on a loan.2.53 A small number had, however, received a loan through the Scottish Investment Fund. In one case this had gone towards the costs of the purchase of new premises.2.54 A couple of TSOs had looked into (or were currently looking at) the possibility of private loan finance. In one case, the TSO had hoped to get a loan to buy the building they operated from since this would give them an asset as well as reducing long-term rental costs. However, they had not taken this any further due to uncertainties in their funding circumstances in the coming year. Another TSO owned their small head office premises and were considering options in relation to this asset, including whether to take out a loan to modernise the current space, or to rent part of it out. Also see 3.16-3.17.2.55 One large TSO had successfully accessed private finance by going into partnership with another TSO. Because both organisations were in good financial order, together they were able to obtain a loan in order to purchase a new head office building which they shared together. This gave them an asset as well as reducing costs in rents.2.56 One participant felt that high street banks (with a couple of exceptions) were generally not able to offer suitable services for the third sector: When it comes down to it, they [high street banks] actually have a very very conventional traditional banking model and you’re really not getting no concession that you wouldn’t do if you were any other SME approaching them. I think however, having said that, there are enlightened banks out there, like Triodos and the Co-operative Bank who take a different approach because their motivation is different. Senior Manager, Local Employability Provider 32
  38. 38. Impact of policy and funding changes2.57 There was some concern among TSOs about the impact the current policy and funding situation in Scotland was having (or may have) on services, clients and staff. This section explores some of these issues including: changes in demand for services; impact on service provision; impact on clients and impact on staff within TSOs.2.58 In Year One, many TSOs had experienced some impact from on-going standstill funding, including staff salaries being frozen. At that time, they were concerned with the implications of future potential funding cuts. Concerns included the impact on service quality, that some client groups might become marginalised and the loss of skills, knowledge and capacity within the sector.Changes in demand for services2.59 In terms of demand for services, only a small number of TSOs noted any significant changes. In a couple of cases, respondents said that some referral agencies were failing to identify specific client groups in order to refer them onto their organisations for specialist support. This was perceived to be because of changes to the way benefit claimants are categorised in relation to Job Seekers Allowance, making fewer eligible. This had meant Jobcentre Plus staff were focused on providing more generic or generalised support rather than providing specialist help to specific groups and so lacked the knowledge in order to refer clients on to other specialist organisations. For instance, this was mentioned in relation to people with disabilities, people with dependency issues as well as lone parents: There are big providers in employability services who are apparently not even identifying if people are lone parents or not, so they are not getting specialist help. Senior Manager, Equalities Focus Group2.60 Other TSOs, however, had experienced an increase in demand for certain types of services, leading to one TSO creating a waiting list. In one case this was due to other agencies closing down and clients who would have been referred to these now being referred to the TSO. In addition, she noted that the clients who were being referred tended to have higher support needs than the clients they had served in the past, which created pressures for their services to meet additional needs they were not set up to meet: [Projects] have identified that there have been a higher number of referrals going into [services] and the nature of the referrals is that they require more intensive support than has been the case before...that particular project is going to be reviewing it’s criteria again...and having to say ‘well actually, that’s not appropriate for us’... not taking any clients and not being seen as I suppose a pseudo-social work service either, but being able to maintain the identity of the organisation and the project and it’s integrity...That’s been the experience in one particular local authority area. 33

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